Ladder Theory — Ladder Fallacy

That’s too expensive for only Hozon.

— Everyone

There are four levels of NBTHK papers: Hozon, Tokubetsu Hozon, Juyo and Tokubetsu Juyo. This four level ranking system unfortunately means that people end up with four slots in their head for placing an object’s importance and desirability. 

This mistake takes its lead from the fact that it’s easy to grasp and remember four simple categories than it is to remember the vast and complex web of smiths, time periods, schools, their associations with each other, their place in history, as well as the myriad of individual qualities that make an item desirable.

All of that complexity is often boiled down into the thinking that an item with a particular paper should fall into a defined pricing range based on the paper.

This puts the cart (paper) in front of the horse (item). 

My complaints about this mentality were bounced back in my face by Robert Hughes with two words that really grasped the problem well. He just said: Ladder Theory. And that crystallized it all for me.

Bear with me. This is long and rambling.

Complexity and abstraction

Human beings do not fare well with complex issues. One case in point is politics. Our political leaders hold our collective fates in our hands. Their decisions affect the quality of roads we drive on, whether we are allowed to drive or not, the quality of the air we breathe, whether or not we are obligated to put on a uniform and go kill our neighbors, whether or not we get health care and education and so on… I could fill a thousand pages with how they affect our lives.

What do we do with this highly complex web of ideals, decisions and effects?

We make a binary classification: left, and right. All that complexity boiled down into a hugely oversimplified abstraction. If you’re lucky, your country also has a center party… and now you have all the bases covered for the billion different issues and ideals of how we should all live together on this planet. 

We do that because the finer details make our eyes glaze over and abstracting the issues allows us to make a useful generalization. Misunderstanding this useful generalization though for the facts of the matter is madness. An intelligent person should be able to look at right and left wing politics and find rational arguments in both sides that can be agreed to. But overall one person may find that they lean in a certain direction and fall under the generality of one classification or another. Even so you might hear someone say, “I’m a fiscal conservative but a social liberal.” This shows that the generalization, while useful, is the cart and it should not be put in front of the horse.

We make these useful generalizations throughout life. We classify human attractiveness on a 10 stop scale. We rate the quality of movies from 0 to five stars. With social media we generalize things into likes and … often just silence, no other classification available. 

If you like a post on Facebook or Instagram, does that really tell the tale of how you feel about it? It’s far too abstract to say that person A and person B who both like that post have exactly identical internal emotional reactions to it and identical motivations for clicking that button.

We always need to understand that generalizations are just that: generalizations. 

Hozon to Tokuju: getting it wrong

Ladder Theory Fallacy is a common but highly inaccurate interpretation of the NBTHK ranking system. The four ranks start at Hozon and become progressively more important and difficult to obtain. This naturally forms a ladder in people’s minds, and from anecdotal observation of items in the marketplace, it leads them to associate pricing bands with these levels of papers. These bands are roughly described below. Bear in mind this is a summary of some flat out wrong conventional thinking.

Thus, if an item is encountered with a particular paper level, it is immediately judged to have a corresponding price level based on this ladder. 

That is, the flaw in the logic is from reversing the observations and assigning it as a law.

The items I see with these prices tend to have Tokubetsu Hozon papers, therefore, all items with Tokubetsu Hozon papers should have these prices.

— Ladder Fallacy

To use an analogy here, it’s the same as saying:

All diamonds I have seen are glittering white crystals, therefore all glittering white crystals are diamonds.

— Ladder Fallacy

In logic, this is going to be expressed as A implies B does not necessarily mean that B implies A. 

Another example would be:

I take a bath every Sunday, therefore if I am taking a bath then it must be Sunday.

— Ladder Fallacy

The statement about taking a bath on Sunday may indeed be true, but it doesn’t mean that you won’t be taking a bath on Friday or Monday too. So you can’t reverse this logic, Sunday implies Bath, but Bath does not imply Sunday.

A broken model

When people invoke Ladder Theory Fallacy they first look at the papers, then they draw a pricing conclusion, then they look at the item in question and determine if it fits the pricing range that Ladder Fallacy established for them. If the item price is higher than Ladder Fallacy predicts, the item is too expensive. The buyer is being ripped off or the item is to be avoided is the conclusion. If the item price is lower than Ladder Fallacy predicts, then the item is cheap and the bargain hunting instincts kick in and the item is snatched up.

All of this descends from this invalid logic of assigning pricing bands to papers rather than trying to understand all of the various ways an item can be attractive, desirable and valuable in the marketplace.

Bear in mind that swords have been around for more than a thousand years and fittings have been ordered, made, paid for, handed down, sold, and used again for centuries before NBTHK papers ever existed. They all had value before these papers, and they will have value still should the NBTHK ever be superseded by some other organization. 

Papers are simply one component in a desirability function which in the end will predict prices much more accurately.

I’ll mention here that if you are a careful reader you will note that this ladder has a hole in it between $50k and $100k. This is another flaw in this theory, this dead zone has no level of paper that can be appropriately fit to it. A buyer in the west adopting Ladder Fallacy is going to tell you an average sword at Juyo over $50k is pretty expensive toward being too expensive for Juyo. Below $100k that same person is going to tell you that this sword is cheap for Tokubetsu Juyo

These concepts are patently wrong.

If this sword is a spectacular sword, by a top maker, it will be priced for what it is. I could take for instance an unpapered sword with a Hasebe attribution that sold at Christie’s. It fetched 50,000 GBP which at the time I think was around $92,000 USD.


This sword had no papers whatsoever, just a gold attribution to Hasebe school. Christies does not stick out it’s neck, they just say it’s Soshu tradition with a gold inlay (that means they are not committing to guarantee anything other than that some Soshu tradition smith of some unknown time period made it and the gold inlay is just there).

It’s a great sword no doubt to my eye, but some risk to the buyer since it’s not authenticated by anyone. That gold attribution could be one of the top Honami judges or it could be added by someone in the 1940s to sell it to a sucker. We don’t know at this point.

But someone had faith in it, to the tune of $92,000 USD. Someone with good taste, and a good eye, and a good evaluation believed this work to be top class work of this school, possibly even Hasebe Kunishige the founder of the school. 

Now, let’s start applying Ladder Fallacy with all its problems. Because there are no papers we can actually accept this price is OK because we don’t have anything to plug it into. 

The buyer of this sword now submits it to Hozon and it is a success. It is confirmed as Hasebe school and is now ranked NBTHK Hozon.

If this buyer-now-owner turns around and puts it on the market at the same price he paid of $92,000, our astute believer of Ladder Fallacy looks at it and shakes his head.

Too expensive for Hozon.

In fact it’s so far out of the pricing range that our astute believer is disgusted by the greed of the seller.

So, the owner now upgrades the papers by submitting to the next level. This is an iterative process, you get access to the next higher level once you have achieved the current level. So he applies for Tokubetsu Hozon and receives it. Now, he puts the sword back on the market. Again, our astute believer in Ladder Fallacy goes to the pricing ladder and comes back with.

Too expensive for Tokubetsu Hozon.

And he again shakes his head and expresses non-interest in such a ridiculously overpriced blade.

So the owner again turns to the NBTHK as it is September and time to submit for Juyo, he sends the blade in and it passes Juyo Token now, and is now an important sword by Hasebe. Furthermore the NBTHK has examined the kinzogan mei and determined that it is by Honami Kojo, one of the better Honami judges, and includes this in the paper. Nice.

Now, the owner goes back to the market and says, look, this is now Juyo Token and Honami Kojo did the attribution, this is pretty sweet right? Will you pay $92,000 for it? 

Our astute Ladder Fallacy advocate checks his mental chart again and says… no way, this is too expensive for Juyo. He tells the owner he is greedy and clueless. No way am I buying this.

Finally the owner waits until Tokubetsu Juyo comes along once every two years and he sends his Hasebe in. It passes on the first try and is now described as one of the finest works of the Hasebe school in existence.

With his Tokuju paper in hand, he turns to our Ladder Fallacy advocate and says, “Now? For the price I paid of $92k”

Our esteemed Ladder Fallacy advocate claps the owner on the back after checking his chart and says, “Wow, cheap price for a Tokuju, I’m in, thanks so much for the great buy!”

Now, at the end of the day, it’s the same sword. Nothing ever changed there, just the papers being slowly upgraded over time. If the Ladder Fallacy advocate actually had any in depth knowledge of the subject, he’d have recognized the potentials in the sword in the first place and bought it as soon as he could. The sword itself would tell him that it was top quality work of a fairly rare and important school. That alone would trigger a well educated collector with the financial means to acquire this sword.

The buyer at the Christie’s auction was this kind of person. Ask yourself, who is the smart guy here and who is the dumb guy. The one who could see where this blade was going or the one who sees only where it’s at? The one who sees all dimensions of the sword including the papers or the one who sees only its paper or lack of paper?

Now, in reality, when this blade came back to the market with Tokuju papers it would not be entering at $92k because of guys like Mr. Ladder Fallacy influencing the market. That reassurance now that this blade is amongst the top elite reduces risk, and uncertainty and that is what makes for a valuation increase in the open market. So it would indeed re-enter at a much higher price because there are no longer any open questions. That higher price is simply supported by it being top quality Hasebe though, not because the Tokuju papers force it into a pricing box.

Now, say it did re-enter and it was offered at $125k, this would not be considered unreasonable by Ladder Fallacy because it randomly fits into the right box. But in fact it’s just an appreciation over its unpapered state by removing uncertainty.

The sword never changed.

The bad part is that the Ladder Fallacy proponent would turn it down at every level because it’s too expensive, until it hits Tokuju with a price increase to where it was in the beginning. Now it’s acceptable.

That’s where the logic breaks down. When the same item is considered unreasonably expensive when it’s cheapest, you have broken logic and a failure to correctly evaluate the item on its own merits and in context of similar pieces.

It’s already Juyo, it’s just waiting

There is a trick in this, which is to hone your abilities and to understand what makes a highly papered sword get to where it got to. You need to be able to solve the desirability function

The factors involved for a sword are:

  1. Maker – who made it and are they highly regarded?
  2. Quality – how good is the artistic integrity of the work? There is a mix of objectivity and subjectivity here. One man’s artistic iron tsuba is another man’s belt buckle.
  3. Condition – how intact is the steel and how healthy is the hamon? If it’s koto, is it shortened or not? Did it retain most of its length after shortening?
  4. Rarity – is this school or smith commonly found or almost not in existence anymore?
  5. Signature – does this piece retain an adequate signature, or an undeniable signature of the smith in question?
  6. Old Paper or Attribution – if unsigned, does the blade come along with an old expert’s attribution? Is that expert highly regarded in his time and now?
  7. History – was this item part of a prestigious collection or owned by a famous person? Did the item itself obtain fame for its exploits over the ages?
  8. Modern Paper or Attribution – this is the only thing considered in Ladder Theory, it is not to be ignored in the desirability function, because the modern paper both authenticates an item to the best knowledge of today’s experts, and shows consensus about the minimum threshold of importance the item represents.
  9. Bells and Whistles – small bonuses for blades having a name, cutting tests, nice koshirae, present in well known and well regarded books, present in old books, etc.
  10. General Risk – is the item potentially containing hidden severe flaws or possibly a fake?

That’s just off the top of my head. Similar aspects apply for tosogu. High scores in all of these departments lead you to the doorstep of Juyo Token which literally means important sword.

If you can judge these 10 categories, and possibly others that I’m missing, you can tell if an item is already Juyo, just waiting for the paper. That is, if you judge correctly, the paper is an afterthought. You are letting the item tell you directly what it’s desirability level is and from there, what kind of valuation should be assigned to it.

Papers are a function of the quality of the item

So this puts the cart firmly behind the horse where it should be. The item leads, and the papers follow. The papers not useless and people who say things like buy the sword, not the papers are also not correct. The papers orbit the item and together they form a system that is purchased together. Rejecting Ladder Fallacy is not rejecting the utility and importance of papers or that they effect price. It’s only rejecting the thought that papers are an absolute pricing yardstick or even the major component in price.

Utility of papers

Papers serve as a crutch that covers over ignorance. It sounds harsh but we’re all ignorant to some degree and papers form a universal language for us to talk to each other. We don’t have to argue too much when independent experts certify something. We have agreed that we respect those experts, and so we respect the judgment and as a result we already we have common ground on authenticity of an item.

When an item is Juyo or Tokubetsu Juyo you further have what is basically an insurance policy that experts obtained consensus about high levels of artistic integrity and importance in all of those 10 categories above. So, if you can’t evaluate it on your own, you know that they did. That paper certifies their opinion.

Also, papers can help educate you. Often times I just can’t see what makes some blades Juyo. I admit I am not a top level expert and that some of these items have something to teach me. In some cases, maybe the blade got a boost in some category that is not immediately visible on its face.

I once had the terrifying experience of producing a kantei (a judgment) to the owner of a sword to Muromachi period Soshu tradition, possibly Fuyuhiro. 

The sword in question was a Masamune from the Kyoho Meibutsucho. A very famous Masamune with a lot of stories from its past. So when he told me this, yes, it was embarassing both for me, and for the blade and … well mostly for me.

Looking at the blade again, I got caught up mostly in condition issues. The blade was far past its glory days but if you isolated some of the healthy parts of the steel and blocked your mind to where the skin was worn away and the core showing through, you could see the ghost of Masamune in there. Maybe though I was right and the blade was just at one point a good Soshu blade that got a Masamune attribution unjustly and through its exploits and fame since then it’s nothing that anyone wants to overturn. Or, it’s just an old, old lady and at first glance I did not see the beautiful young woman she used to be. 

The point here is that if you put it behind glass and said it was Juyo without the attribution or history then I’d have scoffed. Incorrectly. The opinion of experts should in this case hold my hand and walk me through why it’s at this level instead of just letting me be yet another self proclaimed expert who holds his opinion above everything he sees. 

Maybe some other blades with various smaller Bizen or Yamato school attributions I did not like at the museum had similar reasons that were not self-evident about how they got in. You can’t just look at a blade and dismiss it offhand because at first glance it’s not sexy.

That’s a lesson to take and to always remember when trying to evaluate the decisions of the judges.

But about the papers, the real take home is that they only tell a story about the baseline or the minimum, they don’t tell you anything about the maximum.

Too expensive for Hozon

A long time ago in Japan a dealer showed me an ubu signed Awataguchi Hisakuni tachi and it was preserved in top condition. It was then, and still is now, one of the real treats of my life as a collector and one of the most beautiful things I’ve ever seen.

He said while the owner was alive he turned down an offer of about one million dollars for the blade. Now that he was dead, the family was selling it for half a million. I wished I had that money, I wished I could buy that sword.

He then looked at me and said, “Only Hozon. Too expensive for Hozon,” and we all had a good laugh. 

There is no limit to how high that blade could go in terms of papers… or of dollar value. That much should be self-evident to anyone who studies just a little bit and therein lies the joke that someone would put the papers ahead of this blade.

The owner’s family didn’t want it published so didn’t put it to Juyo. That blade could easily be Juyo Bunkazai if the owner wanted. But they stopped at Hozon, they just verified the signature and left it at that. 

Hozon tells you the bare minimum: the blade is antique, it is generally free of fatal flaws, the signature is accurate and here is the attribution or consensus about who made it.

Today this blade has still not been handed to Juyo. It was quietly sold to someone of great taste and financial backing and quietly resides somewhere to the great pleasure of the owner. They don’t need the higher level paper to tell them what it is as they already know.

I don’t need papers to tell me what I have

Now, don’t go running to this conclusion. It’s not right either. This owner of the Hisakuni is not dismissing the paper and saying he doesn’t need it to tell him. The paper is his insurance policy and the judges’ opinion is important. They will do analysis and comparisons beyond the average collector’s gut instincts. This random throwaway line of I don’t need papers to tell me what I have is an arrogant dismissal that one’s personal opinion is better than the best informed researchers in Japanese Swords. That’s flat out ignorant if you ask me.

With all these things, some balance is required. Papers are not to be ignored, however, they are also not the only component to be evaluated. Your own judgment should not reign supreme over everything, however, you should not dismiss your own judgment even when it does not agree with judges.


Balance is key.

Along with not over-generalizing or over simplifying things the way Ladder Fallacy would have.

So, you’re saying Tokubetsu Juyo isn’t worth anything?

I can anticipate people taking this home from what I’m saying and it’s not what I’m saying, and not even close.

Juyo and Tokubetsu Juyo are statements from a panel of high level judges about the artistic integrity and importance of a sword and it puts the sword into a very elite club of the best swords that exist.

That doesn’t automatically set the price though, it influences the price but doesn’t set it or even put it in a range. The same goes for all papers.

This Awataguchi Hisakuni at Hozon is and should be far more expensive than your average mumei Ko-Mihara Juyo Token or even a mumei Ko-Mihara Tokubetsu Juyo Token. The key aspect is that it’s Awataguchi Hisakuni we’re talking about. Think Leonardo DaVinci. A work like that transcends papers, and should, provided we all agree that the work is authentic which is something the papers certify as a best opinion of the judges at the time.

So on average a Tokubetsu Juyo work is going to outrank a Juyo, and a Juyo will outrank a Tokubetsu Hozon, but it’s up to you to know if a blade is only on pause where it is. Or, if the attribution to someone like Go Yoshihiro or Masamune at Juyo makes the blade more important than to someone like Tegai Kanenaga at Tokubetsu Juyo. So we can’t just go from the paper to the price and the price to the paper without factoring in all of that context listed above.

The truth

Once you can let the concept settle that each one of these paper levels indicates a bottom line only, and may indeed be a temporary stop for an item, and that they say nothing about the top line importance or desirability of an item, then you can see that this system of papers is not a ladder but it’s more like the layers of a golf ball:

The Hozon ranking encompasses not only the lowest level of item but covers all of the territory of everything higher than itself. 

Once an item graduates to Tokubetsu Hozon all it does is eliminate the lowest ranked blades. Tokubetsu Hozon similar supports all levels of desirability to the maximum.

There is a bigger jump to Juyo as more types of items are excluded. So, basically the lower bar is raised every time you upgrade a paper.

The influence of this on the market price of a blade is removing uncertainty by discovering the opinion or consensus among experts about where it lies.

Once you get to Tokubetsu Juyo, the bottom bar is raised very high indeed. But with everything, the top bar is unlimited. 


The understanding that items pass Tokubetsu Hozon and Hozon on their own merit while Juyo and Tokubetsu Juyo are competitions is the last essential thing to understand when trying to factor papers into desirability and valuation.

A Masamune has to not only show all of the properties of the best swords when being submitted to Tokubetsu Juyo, it also has to compete and be outstanding work amongst all work by Masamune. Now think about that for a minute.

If you were an artist for one of your works to be Tokubetsu Juyo it would have to be your masterpiece, and also a very highly regarded work among all artworks. This is two dimensions of competition. 

If you yourself are say, the best artist in the world, not all of your artwork would be acceptable for Tokubetsu Juyo even though it is far better than your competitor’s work. Because, by definition, not all of your work can be your best work.

The higher ranking the smith, in a way, the more difficult it is for a blade to pass Tokuju because that blade has to compete with all of that smiths’ other blades which are all excessively good by definition.

In this way, a Juyo Token Go Yoshihiro is far more desirable and valuable than a Tokubetsu Juyo Den Shikkake. Go is just on another level quality wise than the Shikkake school and the desirability of work attributed to him that much more due to his fame. But for one work of Go to pass Tokuju is a huge leap: it competes primarily against other Tokuju Go Yoshihiro. The Shikkake competes primarily against the best work of Shikkake. 

Knowing the context of the smith or school in question is extremely important.

Another example is Kiyomaro. Though his fame is far and wide and his best works are mind blowing there is only one Tokubetsu Juyo work by him. [Note: it’s a daisho, so two swords, but technically one item as it passed as a unit.] Furthermore in spite of the great skill of some Shinshinto makers: this work of Kiyomaro is the only Tokubetsu Juyo Shinshinto that exists. Their problem is simply that the age factor is not in their favor and as a result, they don’t compete well. Therefore, when handling a Juyo Shinshinto work you need to understand that that blade had to pass a very high hurdle because it has a major detraction for being young. Thus, everything else must be extremely good to get to that level. 

When it comes to these competitions, tomorrow’s Juyo Token are by definition today’s Tokubetsu Hozon. Being able to isolate them is a skill that can be learned. And even if something can never achieve Juyo Token or Juyo Tosogu, that is only one element out of at least 10 that decides the desirability and thus the valuation of an object.

Always bear in mind that other fields don’t have this kind of paper with a four level ranking systems. Some things like numismatics have very fine grained ranking systems for condition but the quality and importance are (as far as I know) left to the market to decide. With sculpture and painting, it’s all left to the market. There is no structure sitting there that people can abuse to over-simplify pricing schemes and what is pedestrian today may end up becoming tomorrow’s 100 million dollar artwork at auction.


In conclusion, value is a function of desirability, and desirability is controlled by those 10 points above. Commodities by journeymen will forever be just that and could in fact be Tokubetsu Hozon. Rare artworks by master craftsmen may not yet or possibly never obtain Juyo, but they don’t get hammered into the same hole as the journeyman commodities because they share the same paper. 

Understanding that papers are very important, while not being everything, is absolutely essential in getting to good valuation. 

The last note I want to leave on this topic is that value is a decision jointly made between seller and buyer. There are old timers that grumble “That price is too high! Back in my day we used to get a Kiyomaro for $20k!” Yeah well back in your day you used to get a pack of cigarettes for a dollar too and a coffee was 25 cents. I don’t mean to mock (more I am teasing to make a point), but somehow in this field it becomes upsetting if prices rise. In paintings and sculpture when a piece sets a new record there is thunderous applause and congratulations involved. Yes, there is speculation involved in this and yes, I am not on board with speculation, but there is nothing wrong with a general rise in prices. The alternative is completely static prices which means falling value due to inflation. If you buy a Norishige for $50k 20 years ago and sell it for $50k today, you lost money due to inflation. 

Prices should move. 

Furthermore, the more educated the public is, the more the public’s desires will change and the higher quality items will see price appreciation while mediocre ones fall. 

The other complaint that old timers have is that, “This hobby is doomed, I can’t sell my ____ for what I paid for it.”

So the net of the opinions is: price rises are bad, prices falling are bad, and static prices are good (except that static prices are falling prices due to inflation). All of this shows a lack of contemplation of the subject matter.

I don’t get the doom and gloom personally, because usually that complaint about _____ falling in value is because _____ was a mediocre item that got mispriced in the first place when it came over from Japan. 

The origination of the Ladder Fallacy has a lot to do with dealers hauling stuff over and convincing people that Tokubetsu Hozon made something more special or that this other blade was Juyo so it had a Juyo Price and you’d probably need a Juyo Polish on that item if you wanted it to pass Juyo in the first place. 

In reality, there is a good polish and a not so good polish and a bad polish. There is no Juyo Polish. Similarly there is no such thing as a Juyo Price, this is a fallacy lead by this thought that papers lead the way for pricing and they don’t. 

But it’s convenient if you want to bring over the weakest possible item that passed Juyo, of a school or smith that is not that desirable, maybe the blade is short or in weak condition and it just limped over the finish line to get Juyo. This is the kind of thing that would be cheap to acquire, then bring over into another market, and ring the bell heavily on the level of the papers being Juyo. This kind of marketing reinforces this Ladder Fallacy mentality. 

Like someone on a dating site, people market items based on their best properties, and if the best property of a particular otherwise not so interesting blade is its paper, then that paper goes front and center and a premium is demanded because of the paper.

That reinforces Ladder Fallacy, something that is completely invalid.

Concentrate on the 10 points, don’t dismiss papers, but really don’t make the paper the focus. If you do you will miss the forest for the trees.

I said recently when someone told me something was too expensive for Tokubetsu Hozon papers, that I wasn’t selling the papers. I’m not. Nobody is. The item speaks for itself and can stand or fall on its own. 

The papers just underwrite the bottom line. Never forget that. They are part of the package, but they are not the whole package and they are definitely the cart behind the horse. Important, critical, but not the key element and in many cases they will upgrade so that paper is not necessarily forever. There is no way to get new Juyo without looking at the current crop of Tokubetsu Hozon and picking the best ones.